The Office of General Counsel issued the following informal opinion on October 11, 2002 representing the position of the New York State Insurance Department.
Re: Compensating Unlicensed Individuals for Referrals
Question Presented:
May a New York State licensed life, and accident and health insurance agent compensate attorneys and accountants (including CPAs) for referring persons to whom the agent will sell life insurance, annuity, structured settlement, and health insurance products?
Conclusion:
Yes. The agent may compensate attorneys and accountants (including CPAs) for such referrals if (i) there is no discussion of specific policy terms and conditions, and (ii) the compensation is not based upon the purchase of insurance.
Facts:
A New York State licensed life, and accident and health insurance agent (the "Agent") plans to compensate attorneys, and accountants (including CPAs) for referring persons to whom the Agent will sell life insurance, annuity, structured settlement, and health insurance products.
Analysis:
N.Y. Ins. Law § 2114 (McKinney Supp. 2002) governs the payment of commissions, and other compensation, to persons, firms, associations, and corporations for services in obtaining, soliciting, or procuring new life insurance, annuity, accident and health insurance, and health maintenance organization contracts; it provides in pertinent part:
(a) (1) No insurer or fraternal benefit society doing business in this state shall pay any commission or other compensation to any person, firm or corporation, for any services in obtaining in this state any new contract of life insurance or any new annuity contract, except to a licensed life insurance agent of such insurer or of such society or to an insurance broker licensed under subparagraph (A) of paragraph one of subsection (b) of section two thousand one hundred four of this article, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.
(2) No agent or other representative of any such life insurer or fraternal benefit society shall pay any commission or other compensation to any person for any services of the kind specified in paragraph one hereof, except to a licensed life insurance agent of such insurer or of such society as the case may be.
(3) No insurer, fraternal benefit society or health maintenance organization doing business in this state and no agent or other representative thereof shall pay any commission or other compensation to any person, firm, association or corporation for services in soliciting or procuring in this state any new contract of accident or health insurance or any new health maintenance organization contract, except to a licensed accident and health insurance agent of such insurer, such society or health maintenance organization, or to a licensed insurance broker of this state, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.
(4) Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.
N.Y. Ins Law § 2114(a)(4) (McKinney Supp. 2002) excludes from the services specified in § 2114(a) the referral of a person to a New York State licensed life insurance agent, or broker (see N.Y. Ins. Law § 2104(b)(1)(A) (McKinney Supp. 2002)), or an accident and health insurance agent, or broker (id.), if: (i) the referral does not include a discussion of specific insurance policy terms and conditions, and (ii) the purchase of insurance is not a condition for such compensation.
The Agent may, therefore, compensate attorneys and accountants (including CPAs) only for referrals that do not include a discussion of specific policy terms and conditions, and do not base the compensation upon the purchase of insurance.
Please note that this opinion is based solely on the New York State Insurance Law and the facts as presented, and does not address the laws that regulate the practice of attorneys, accountants and CPAs.
The above opinion is informal and not binding on any court. For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.